FX volatility continues as BoE make further cuts and increase QE

Mar 19, 2020

The market volatility has continued today with rates continuing to be extremely choppy.

Sterling has clawed back some of its unprecedented losses throughout the day and a surprise cut from the BoE coupled with additional quantitative easing had been taken well by the market.

The incoming BoE Governor, Bailey, isn’t wasting any time in the new job with the BoE cutting interest rates again (from 0.25% to 0.1%) during the emergency meeting. They also ramped up their quantitative easing programme by another £200 billion which brings the total number of assets purchased under the programme to £645 billion.

In its statement, the bank noted ‘the spread of Covid-19 and the measures being taken to contain the virus will result in an economic shock that could be sharp and large, but should be temporary’. They’re clearly preparing additional easing measures in the coming days/weeks in order to further support the UK economy, stating that it will issue further guidance ‘in due course’. The next scheduled meeting is set to take place next Thursday 26th March.

As a result, the Pound has gained nearly 3% against the Euro today but still only trades around a 7-mth low after taking a battering overnight (where it went near to the historic lows of the 2008 financial crisis). The GBP/USD has seen some wild swings again today with a range of nearly 3%. It continues to trade around the lowest levels since 1985, albeit 2-cents higher from last night’s lows.

Stocks generally appear to be more stable today but the whole situation is still very fluid and new coronavirus cases are still jumping higher in different parts of the world. There have been further murmurs today of a range of potential new experimental virus therapies (using existing drugs, e.g. chloroquine) which could give the market some hope particularly if positive treatment results increase.